The three territories sidestep the worst of the economic meltdown.

What was shaping up to be a disastrous 2009 turned out to be not so bad. Indeed, it ended on a bit of a high note, with exploration spending in the Yukon as much as four times higher than had been anticipated, the diamond mines in the Northwest Territories announcing that they would hire hundreds of new workers (and try to get them to live up here), and Nunavut preparing to bring a new mine, Meadowbank, on-stream.

January 2009 dawned without much hope. The housing bubble in the U.S. had popped, the first domino in a trail of destruction. Next came the gumming up of the asset-backed commercial paper market, then the banks stumbled (some fell) and stock markets plummeted. The credit market dried up and even well-run, stable businesses began to feel the pinch. “We saw the market get punished indiscriminately,” says Harvey Brooks, deputy minister with the Yukon’s Economic Development department. “Good businesses saw their share value drop without any particular reason.”

But over the course of 12 months we’ve seen a tremendous rebound. So what if the Yukon hasn’t – and isn’t – going to get all of its ABCP money back? Much of the rest of the news has been pretty good. There are signs of recovery in many countries, and most forecasts for economic growth in 2009 and 2010 have recently been revised upward. The International Monetary Fund is expecting Canada’s gross domestic product to decline by 2.5 per cent in 2009, but recently increased its 2010 forecast to growth of 2.1 per cent from an earlier prediction of 1.6 per cent.

The prices of precious metals are way up, copper rebounded, and a number of other metals have begun a turnaround. Since the territorial economies are tightly entwined with mining, these developments have been welcome news.
And when you stand back and take a look at the statistics over the slightly longer term – say, from 2000 – all three territories have fared very well. Thanks to the diamond mines, the NWT saw a whopping 115 per cent increase in its GDP between 2000 and 2008. Over the same period, Nunavut’s GDP was up 79 per cent and the Yukon’s 68 per cent. All of these compare very favourably to a national increase of 49 per cent.

Narrowing the focus in both time and place, 2009 was a weak year for Nunavut’s GDP. “The public sector is very big in Nunavut and that provides some stability,” says Marie-Christine Bernard, an associate director with the Conference Board of Canada, “but construction of the Meadowbank gold mine was wrapping up by the middle of 2009, so capital expenditures were slowing down.”

Nunavut, where a single moderately-sized project like Meadowbank heavily influences the numbers, can expect weak construction numbers for 2009, and with no big mining projects planned in the near term, we won’t see a recovery in the construction industry right away. But with the Meadowbank mine starting to produce in the first quarter of 2010, there will be a jump in economic activity. “The mining sector is high value-added and that does go directly to the bottom line,” says Bernard.

Businessman Eric Leuthold, owner of Polynya Adventure and Coordination, says tourism has taken a hit in the territory, but that mining and government work have prevented things from slowing down too much. “I think next year is going to be a busy year, especially now that people are assuming that the economy has settled down,” he says. “You’re going to see a lot more people travelling up here: business travel, government travel, tourist travel, and anyone that has been holding back in the mining sector is going to let go now.”

The NWT was perhaps the most affected of the three territories from the global slowdown. While final figures are not in, the NWT saw a pretty big decline in GDP in 2009. The territorial economy is heavily influenced by what’s happening in the mining industry, and in particular diamond mining. Global demand for diamonds fell, and all of the diamond mines scaled back their operations. “That’s about a quarter of the NWT economy,” says Bernard, “so when it falls it goes directly to the bottom line.”

As well, construction is an important part of the NWT economy and Diavik finished its underground expansion. With that out of the numbers, the NWT saw weak GDP growth for 2009. “We also saw the labour market retreat and a drop in employment, so that means weak income gains and consumption,” says Bernard. The Conference Board is forecasting a small bounce back for the NWT in 2010, but the recovery in the mining industry will be spread over two years. It will, once again, be driven by the diamond mines. In November, Rio Tinto announced plans to hire 150 workers as it moves from open pit to underground operations at the Diavik mine, and De Beers Canada says it will expand its workforce at Snap Lake by 175 people over the coming year.

The Yukon weathered the storm over the past year better than the other territories, thanks largely to a timely gold find by junior mining company Underworld Resources. Gold and silver – two of the Yukon’s dominant metals – actually benefitted from the economic uncertainty, as investors fled the U.S. dollar for what is perceived to be a more stable investment. “When we entered the spring our estimate for exploration for Yukon was very conservative – $25-$40 million,” says Brooks, the Yukon’s deputy minister of Economic Development. “It’s still high in historical context, but nothing compared to what actually transpired. We found that our industry was able to find investors and we believe the year is going to be over $90-million.”

The Yukon’s Minto mine was also in operation for the full year, and two other mines – Bellekeno and Wolverine – are set to come on-stream this year, and so have been busy with their construction phases.

Finally federal stimulus funding will be a big factor for Yukon this year and next. “We have a number of key projects that are using the stimulus funds,” says Brooks. “We have an emergency services building, a corrections facility, a health workers residence going up, and we have a housing program.” About $60-million will be spent in the territory over the next two years on social housing.